Public Bill Committee

[Sir Nicholas Winterton in the Chair]

Further written evidence to be reported to the House

PPE 02 Professor Justin Fisher, Professor of Political Science, Brunel University
PPE 03 Professor Keith Ewing, Professor of Public Law, Kings College London

Nicholas Winterton: Before I welcome our distinguished guests this afternoon, I want to say a few words to the Committee. Before we begin to take evidence, I would like to respond, briefly but fully, to a point raised in Committee by Mr. Reid on Tuesday and again, informally, this morning by Mr. Duddridge. Mr. Reid drew attention to the short time between the end of the evidence sessions and the deadline for the tabling of amendments for Tuesdays sittings, and asked whether starred amendments might be selected.
My co-Chairmen and I appreciate that there is limited time before the rise of the House this evening, but the decision to structure the Committees time in this way was taken by the Programming Sub-Committee and I remind the Committee that it was done so after considerable discussion. The programme motion was approved by this Committee on Tuesday morning, when one of my co-Chairmen was in the Chair. It was in the gift of the Committee to provide itself with a bigger gap after the evidence sessions. The deadlines for the tabling of amendments are there for the benefit of all Committee members, who need sufficient time to consider the amendments before they are debated.
I also note that the issues discussed in the evidence sessions so far are not entirely new. The views of the Electoral Commission, for example, and two of our three distinguished academics have already been submitted in written evidence to the Committee. In such circumstances, and in line with existing practice in Public Bill Committees, I can confirm that my fellow Chairmen and I do not intend to select starred amendments. That is my statement; if Mr. Duddridge wishes to rise on a point of order, I am happy for him to do so, but he should remain seated, so that his voice can be picked up by the microphone.

James Duddridge: On a point of order, Sir Nicholas. I wish to remain seated. Notwithstanding what you said, I ask you to look at the matter a second time. The Opposition Front-Bench team found that there were significant new pieces of information this morningtangible differencesthat were not mentioned in the written submissions and of we were not aware before. As the Whip, I shall not go into policy issues, but there are significant changesthat is the Oppositions position. Furthermore, during the Programming Sub-Committee, if I may refer to that, we were given reassurances. While there was no commitment to take starred amendments, an indication was given that the Committee would be able to review the issueand on that basis we were happy to proceed. I do not know whether there is another way forward, whereby we could table starred amendments, then circulate them to the various parties on Friday. They would still be starred amendments on a day on which the House is not sitting, but we would be happy to circulate them then.
There are significant amendments that we want to table as a consequence of evidence. This meeting does not break up until 3 oclock and we do not know when the business of the House will be completedit could even be completed very shortly after us, so that there would not be time for us, physically, to go and table the amendments.

Nicholas Winterton: I note what Mr. Duddridge says. I remind him and other Committee members that they have until 6.30 pm to table amendments. I have not received noticethe Government, who would be more in the know, have made no such indicationthat todays business will finish early but, at the moment, I do not anticipate that it will do so. I am certainly prepared to listen to any representations made by the Opposition parties. I would be happy to receive any evidence, perhaps in writing, as to where they believe the evidence given this morning, perhaps by the Electoral Commission, differed dramatically from the evidence that it submitted in writing. My fellow Chairmen and I should certainly give the matter consideration. However, I cannot promise that we shall change our ruling and select starred amendments. [Interruption.]

Nicholas Winterton: Briefly, Mr. Djanogly.

Jonathan Djanogly: Further to that point of order, Sir Nicholas. My understanding was that the point of hearing the evidence in these sessions was to see whether we needed to table amendments to the Bill as a result. According to your ruling, we shall have a very short time this evening to go through Hansardif that has been produced by the time our proceedings end. It would be of help if the Clerks could advise us whether that would be the case, because we shall have to take Hansard, study itsome complicated concepts and issues were discussed this morningand review whether further amendments need to be filed, all within a matter of hours. As my colleague said, that would only be if the business of the House lasts until 6.30 pm today.

Nicholas Winterton: Two things. First, the Opposition could advise the Chair as to what important amendments they believe need to be tabled, based on the evidence given so far. Of course, next weekI am in the Chair on Tuesday morningthe Committee can make what progress it chooses. It could well be the case that the areas covered by the amendments that the Opposition might wish to table will not be taken on Tuesday morning. Therefore, to an extent, the Opposition and the Committee as a whole are in control of their own business in that connection.

Andrew Tyrie: Further to that point of order, Sir Nicholas. I am very concerned about this, first, because it was discussed informally before we met the first time. I received clarification that, under the new public Bill procedure, there would be scope for flexibility, to enable the tabling of amendments in the light of evidence that was submitted. I specifically discussed that, and was given the same information that we have just received about what happened through the usual channels, before the start of our formal meetings.
Secondly, if I may say so, it is a little unreasonable to ask us to provide written evidence of where we think that we might need to table amendments, bearing in mind that all the relevant people are sitting here in front of you for the whole period, Sir Nicholas. We cannot even be sure that the House will run until 6.30 pm; debate may close earlier. Thirdly, to provide one example, you were in the Chair, Sir Nicholas, when the Electoral Commission said that it would like to add to the evidence. It produced a specific example relating to its concerns about the appointment to the commission board, and the change of the 10-year rule to five years. [Interruption.] I am pleased that the Minister wishes to speak, but I do not wish to prejudge whom the Chair might call.

Nicholas Winterton: I am going to call the Minister, then I will stop taking points of order. We have distinguished witnesses here and we must finish taking evidence from them by 2 oclock. If necessary, we can continue the points of order then, but I prefer to call the Minister first.

Michael Wills: Thank you, Sir Nicholas. In the spirit of helpfulness with which Government Members have approached the matter, we want amendments to be tabled as long as they are genuinely based on new information. We want to be helpful and will be as accommodating as possible on an informal basis, but only if there is genuinely new information. I am always prepared to be enlightened, but so far the discussion has been a recycling of familiar points on all sides. We have a useful memorandum, and there are genuinely new points that need to be considered. However, we will be as flexible as possible.

Nicholas Winterton: I intend to make progress. Perhaps we need to sit after 3 oclock, informally, to see whether we can resolve the matter. I do not wish to embarrass our witnesses who, in some cases, have come at great inconvenience to themselves. We should do them the courtesy of listening to them at this stage, and we will find another way to resolve the problem. The Minister has indicated that he is prepared to be flexible, and the Chair wants to ensure that all important matters are debated. I suggest that we make progress. If the Whips on both sides of the Committee wish to come to the Chair during the discussion over the next two hours, I would be happy to receive representations.

David Howarth: That procedure excludes me, and I am the person who has the example.

Andrew Turner: He is a Liberal; he cannot help it.

Nicholas Winterton: Mr. Howarth is being very agreeable.

David Howarth: The specific example that the Minister should consider came up this morning. The Electoral Commission said that there is a problem about what will happen in clauses 4 to 7the clauses we will consider first on Tuesdayshould a political party fail or refuse to appoint a commissioner. That is a brand new point and is not in any of the written submissions. It is a technically difficult point to deal with, but I do not think that we will be able to discuss it on Tuesday, given the rules.

Andrew Tyrie: That is exactly the point I raised. In a similar area, the chief executive of the Electoral Commission said that for the first time, he found difficulty with the switch from ten to 5 years for the bar on party political affiliation before appointment to the board.

Nicholas Winterton: I have heard what has been said. I have indicated that I wish to make progress and I intend to do so. I am sure that Mr. Duddridge and Mr. Lucas can make representations to the Chair as we perform our business this afternoon.
On behalf of the Committee I extend a warm welcomeat lastto our three distinguished visitors. For the record, will you identify yourselves?

Michael Pinto-Duschinsky: I am Michael Pinto-Duschinsky.

Professor Justin Fisher: I am Professor Justin Fisher.

Professor Keith Ewing: I am Keith Ewing.

Nicholas Winterton: Thank you. The first question will come from Mr. Djanogly.

Q157 1Mr. Djanogly: Thank you, Sir Nicholas. I hope that the evidence session does not produce too much information that might require amendments to the Bill. Gentlemen, I fear that you could have done better in an earlier session. I would like to address the broader issue. To date, we have been considering the nuts and bolts of the Bill. I would like us to step back for a moment and consider the Electoral Commission as a whole, which we have not yet done.
It has to be said that many hon. Members, certainly in the Conservative party and perhaps in other parties, have been reviewing the performance of the Electoral Commission in recent years and have thought it in many ways deficient. That has led quite a number of people to say that the commission should be abolished as an institution. That is not the official position of our party or any other party, as we have a Bill here to improve its performance, but that would be a valid starting point for you to give your views on whether it is a valid institution and whether the general thrust of the Bill is correct in terms of its reform, if you think that that needs to be done.

Professor Keith Ewing: From my point of view, the Electoral Commission is essential. I cannot contemplate us having a system of regulation of elections, donations or party funding without an independent agency of this kind. I am reinforced in that belief by the fact that most other mature Westminster-style democracies have agencies of this kind. It would be inconceivable now not to have such an organisation.
I am aware of complaints and concerns in the House and elsewhere about the performance of the commission, I think since it was established in 2001. I am not sure who is ultimately responsible for the failure, as some see it, of the commission to perform as well as it might, but I suppose I feel slightly that much of the criticism has been unfair, in the sense that this body has been presented with a very detailed framework of legislation and much of it, or the drafting of it, has been quite difficult. Much of it is very technical. Much of it is incomprehensible. I think it has been as steep a learning curve for the commission as it has been for everyone else.
My sense is that since the loans for peerages affair, there has been a significant improvement in the performance of the commission. Certainly over the last 12 months, the regulatory role of the commission has greatly increased and the profile of the commission has increased, and I think overall the performance of the commission has improved. From my point of view, there should be a healthy tension between Members of the House and the commission. They should not be in each others pockets. It should be a conflictual, not a consensual, relationship. I would see that as quite healthy.
That leads me into a measure of scepticism about the desirability of some of the reforms proposed in the Bill. I am not convinced of the case for political commissioners. I do not know of any other Westminster-style democracy where such an idea has taken root. In most countries, electoral commissions

Michael Pinto-Duschinsky: Save for the United States?

Professor Keith Ewing: That is not a Westminster-style democracy. Let me finish the point. I am not confident that this is a good idea and I have a certain hesitancy about the proposals to deal with civil penalties, but perhaps we could explore those in more detail when others have had a chance to speak.

Q 2

Nicholas Winterton: Does Mr. Pinto-Duschinsky want to come in here? He appears to have made some remark.

Michael Pinto-Duschinsky: Yes, I made a factual point, as I sometimes do, because it is good to get these things correct.
On the question itself, there have been some grounds for concern about the Electoral Commission. Some of them have been addressed; I agree with Professor Ewing on that. There are grounds for concern, first, about the appointment procedures for the original chief executive and the original chairmanit is very important that those appointment procedures are seen to be wholly non-political. I think this is a matter of history now.
The commission spent too much time on electoral policy and participation, in encouraging modernisation and participation, and ignored its regulatory role. That is being addressed now to some extent, but it is notable that the assurances on examining the inaccuracies in the electoral register that the Electoral Commission gave in writing to the Committee on Standards in Public Life have not been followed through. This has been in the service of not wishing to highlight the huge extent of inaccuracies in our electoral register and the need to change to a system of individual registration. Paradoxically, the commission favours a system of individual registration, but it has not brought forward the evidence that it promised to the Committee on Standards in Public Lifea major survey of inaccurate names on the register.
The commission also has failed to deal effectively with the problem of electoral fraud. The amount of electoral fraud has been systematically understated. Indeed, Electoral Commission documents called for local reporting to be careful in case reports on electoral fraud lessened confidenceit was inviting people not to report electoral fraud.
It is significant that the key questions of registration and electoral fraud have been left out of the Bill. Those are the key gaps in the electoral system today and in the architecture of the Political Parties, Elections and Referendums Act 2000. The other thing that I should point out is that there are loopholes in the 2000 Act relating to funding by third parties and the funding of referendums.
Those are four vital areas that have been left out of the Bill. Some of those relate to the Electoral Commission, and some to the wider problems. However, I do not think that at the moment we can really think in terms of abolishing the Electoral Commission. We should want to help it to concentrate on its core role. To that extent, there is a lot in the Bill with which I would agree.

Q 3

Nicholas Winterton: What about Professor Justin Fisher?

Professor Justin Fisher: I would broadly concur with Professor Ewings view. It is important to remember that the changes introduced by the 2000 Act were a series of fundamental changes, both for the parties and the establishment of the commission. Therefore, as Professor Ewing suggests, there has been a steep learning curve. It is also important to divorce the criticisms of the commission made by the three separate reports in 2006-07 from the situation that followed. It is unhelpful to focus on activity before that period.
The commission has addressed some of the complaints that were levelled against it. Some of those complaints were reasonable, some were utterly unreasonable. In my study of how campaigns were conducted, it seemed that some of the parties had unrealistic expectations of what the Electoral Commission would and would not do. As a result of those observations, I welcome the proposals in the Bill to reduce the qualifying period for Electoral Commission staff, which is a sensible move.
I am, however, opposed to the move to introduce political commissioners. That satisfies no one and the formula proposed fails to recognise the increasingly multi-party character of British politics. If I were a leader of the Scottish National party or Plaid Cymru, I would be hopping mad, given that my party would be in government or in coalition in the devolved institutions yet under the proposals there would be room for one representative only.
Many of the complaints have been addressed. I welcome the move on commission staff, but I think that the move on political commissioners is a step too far and needs a rethink.

Q 4

Nicholas Winterton: Does Professor Ewing want to come back? You had a short innings, so do you want to add to your opening remarks?

Professor Keith Ewing: Not really, except on the political commissioners to endorse what Justin has said.
As I said, I do not know of any Westminster-type democracies that have the idea of political parties being represented on the commission. I cannot think of other regulatory bodies, although there might be some, that include members of the regulated community to regulate the people who are to be regulated. It seems to be a very strange idea.
A further point is that I understand the reason why the proposal has been introduced: it comes out of the lack of confidence in the commission and a time of problems in the past, to which Justin referred. However, I think those problems have been overcome. An idea that was designed initially to help the commission could in the long term serve only to weaken it. We ought to be seeing what we can do to strengthen the commissions independence and overall authority.

Q 5

David Howarth: Professor Fisher started to answer this question in his earlier remarks, so perhaps I can give the other two a go first and come back to him. Looking specifically at the party fundraising and expenditure parts of the Bill, what do you think are the leading problems in that area and to what extent do you think the Bill solves those problems?

Professor Justin Fisher: I shall focus first on expenditure. The Bill seeks to address what I consider a genuine problem: excessive spending in some constituencies prior to the official candidate campaign period. That clearly is a problem and there is academic evidence to support the argument that it has beneficial effects for a party that engages in pre-campaign spending. However, I have deep reservations about the proposal put forward to counter that issue, which will effectively return us to the situation we had before the implementation of the 2000 Act. It seems that that is a poor solution for a number of reasons.
First, before 2001, when the new Act came into place, the system known as triggering barely worked. It was almost impossible to enforce and there was a great deal of uncertainty from all sides about what constituted appropriate spending. Secondly, it fails to deal with the fact that the number of candidates standing for election has increased. You will see in my memorandum that at the last election there were 3,354, which is an average of five per constituency. The idea that the Electoral Commission can effectively police those with completely different start points seems to be a significant challengefor it and for local returning officers.
A further concern that I have simply relates to the practicalities of implementing this sort of legislation in terms of the agentsthose who are legally responsible for MPs expenses. We have been studying the work of agents at elections at every election since 1992we have a lot of data on who the agents are, how much experience they have and so on. In our most recent survey, which is of 2005, we found not only that the vast majority were volunteers, but that a majority had not worked under the previous legislation. More than 60 per cent. of agents from the main five parties had no experience of triggering. In the original White Paper proposals, the implication was that we were simply going back to rules that had existed before and that everyone would know how they worked. That is patently not the case.
My concern is that we might create an unreasonable regulatory burden on volunteers and, without those volunteers, elections simply will not run. Part of the Phillips inquiry and many of the inquiries on party funding were about re-engaging voluntary activity at local level. It strikes me that although this proposal has the right message at its heart, it is the wrong way of going about things.

Professor Keith Ewing: In direct response to your question, my view is that, overall, the structure put in place in 2000 by the 2000 Act is basically sound. It was designed to deal with three questions: first, the issue of transparency; secondly, foreign donations; and thirdly, the issue of election expenses. That was all wrapped up with an independent commission to supervise the process. That package emerged from a consensus report, around which the three main parties united. To this day, the foundations that were put in place as a result of the Neill committee report are sound, but, as is inevitable with any form of regulation, flaws, loopholes and gaps are exposed as political party practices on fundraising and spending change.
Despite all the excitement that has emerged in the past two or three years, my view is that the legislation is sound but that loopholes need to be plugged. There are loopholes in relation to transparency, such as the issue of unincorporated associations making donations to political parties. They are largely unregulated and there is a lack of transparency on that. One issue that needs to be addressed is the extent to which foreign donations are adequately controlled consistently and in the spirit of the Neill committee. Another issue is the serious loophole on spending limits.
I do not feel quite as strongly about the third issue as Justin does. Perhaps triggering could be made to work, and perhaps we need to go back to that with a more realistic view about how it can be implemented, bearing in mind our experience from 100 years of the arrangement since 1883. The problem will be with what happens to the money. If the candidate cannot spend the money that is currently being spent, where will it go and who will spend it? Currently, if the money is going to be spent by the constituency party, it will form part of the overall spending limit of the national party. That would cover one of the obvious potential loopholes that will emerge from a triggering regime. What we have to ask is what other loopholes might emerge. We have some time, before the Bill is passed, in which to anticipate potential loopholes and to take steps to deal with them. This loophole has to be addressed, for obvious reasonsfor example, it is undermining the spending limit ambitions of Neill. Those three issues are not all dealt with in the Bill, but they need to be.

Q 6

David Howarth: The idea of anticipating loopholes in the Bill raises the big issue of party spending as opposed to candidate spending. Do you agree that we can see that that is going to be a problem in the future, and that we should be doing something to address it either at national level orthis is a big gap in the Billat the local level. We currently have national spending limits, although only for a year, and candidate spending limits in the election period, but we have no party local spending limit at all.

Professor Keith Ewing: In the non-election years.

Q 7

David Howarth: Yes.

Professor Justin Fisher: That is quite true. The danger is that you would require volunteers to keep records, for which they could face criminal prosecution if they are in breach, throughout the campaign period. Unfortunately, we have to accept that as long as we have a difference between party spend at national level and candidate spend at constituency level, some things will slip between the cracks. The Bills goal should be to try to deal with that as best it can, but we should be under no illusions that it will plug the hole completely.

Michael Pinto-Duschinsky: First, let me address the architecture of the system and what is wrong with party funding. What is wrong is that not enough people want to give money to political parties or candidates. We have had nothing like the Obama method of fundraising large numbers of small donations through the internet. That applies to all parties, and would apply to your party. Compared with the number of votes that you get, the number of members that you have is very small. That is the nub of the problem with British party funding, but that is not amenable to legislation. Indeed, if you have too much regulation and too much subsidy, you will make the problem worse.
The Bill looks at one legitimate area and one legitimate loophole that relate to local candidate spending, but it does so in a way that leads to many problems of detail. As an observer of the British constitution, I think that the debate about whether amendments can be tabled by 3 oclock or 6.30 shows great disrespect for the British constitution. You cannot debate important matters that may be of detail, but which would have crucial effects on the working of our system and the confidence in it within such a tight deadline.
Keith Ewing and I were both expert advisers for the Labour party in the Fiona Jones case, and we know the tragic consequences for her and for the political system of certain ambiguities that will come back in spades under the Bill. For example, Fiona Jones was charged for transport. What is transport? We know from the Bill that transport costs are included as a candidates cost, but that does not tell us what is meant by transport, what is included and what is excluded. In fact, we shall not know that until after the Electoral Commission gives guidance and it is put before the House. It would be scandalous if the Bill came into force until that were known. Indeed, it is not for the Electoral Commission to give that guidance in the first instance. It ought to give guidance on unanticipated matters of law, but you can anticipate that that is a loophole and it is for Parliament to be much more careful about what is a transport expense.
When is local party spending candidate spending, and when is it not? This morning, the chief executive of the Electoral Commission said words to the effect that that was a knotty problem. Well, it is, but it is for you to solve it before you put a half-baked Bill through the House of Commons to become our sovereign law. Moreover, let us consider the big loophole whereby Members of Parliament can, through the communications allowance and elsewhere, put forward advertising that their opponents cannot. If you want amendments, I can give you a set of possible amendments, one being that, in the communications allowanceI say this only half in jestthere should be equal time for all Opposition candidates. For example, if any of you put forward eight pages about yourselves, each of the other candidates should be able to do so without payment, or without it counting against the limit, or you change the rules of the communications allowance so that, to produce equality, you cannot do it. To create fairness, we need to look carefully at the uses of the communications allowance. That was brought up clearly on Second Reading.
I come to another problem. When does national expenditure that is targeted on marginal constituencies count as local expenditure? We all know that political parties will have their posters sited more in areas that benefit marginal constituencies than in others. I asked the Electoral Commission about that very point, and it said that it did not have the money to investigate the matter. The real question is what national activities will count as local activities. There is then the matter of transitional arrangements and, finally, third-party expenditure. Even if you say that you bring political parties under a regulatory regime throughout the parliamentary cycle, you will find, as does exist, that many pressure groups are in practice offshore islands of one political party or another, rather like the German political Stiftungen, which have legal independence, but everyone knows that they support one party or another. To go down some of these lines, you have to look at that as well. The bottom line is that a decent Bill could come out of this. The Government have a legitimate concern, but there needs to be time for discussion of all the details in a sensible way, rather than rushing, with the inevitable bad results.

David Howarth: May I come back with just one more question?

Nicholas Winterton: Order. I ask colleagues to ask brief, succinct questions. Martin Linton caught my eye first, then Eleanor Laing, the Minister and, when he comes back, Mr. Tyrie. I see that David Howarth wants to come in again, but we must move on.

Q 8

Martin Linton: Thank you, Sir Nicholas. I have some specific questions, but I shall try to be brief.
No one pretends that triggering is a 100 per cent. foolproof method, or even necessarily the long-term solution to the problem, but I cannot quite agree with Professor Fisher. On the one hand, he says that it is impossible to police but, on the other, points out that there has been only one case in living memory. My specific question is, if we do not have triggering, what solution would Professor Fisher advocate? He mentioned four months, which I supported in the Electoral Administration Bill, but which the Lords did not like. What about 365 days, as with national expenditure? What about a solution advocated in the past by the Neill committee of a Canadian-style system, lumping local and national spending together and dividing it by the number of constituencies, so that, effectively, you have a single limit for local and national spending?
I have another couple of quick questions, mainly addressed to Professor Ewing. I agree with him that, just as taxation legislation has to be renewed every year to deal with the accountants loopholes, this legislation has to be updated on a regular basis. I would be interested if he could elaborate a little on what he sees as a solution to two specific points he made. One concerns the unincorporated associations and private companies that have become a conduit for undeclared donations. Would it be possible to bring these bodies into the legislation, so that whatever applies to political party donations also applies to them? In many cases, they have just become a conduit for non-disclosed donations.

Nicholas Winterton: Order. May I ask Mr. Linton to come to a conclusion? We have less than 20 minutes and there are a lot of people who want to come in. I apologise to our witnesses if they feel that things are being hurried, but unfortunately these are the procedures under which we operate. The Committee agreed with timings proposed by the Programming Sub-Committee, and I am in the Chair as an adjudicator.

Martin Linton: I have only four more wordswhat about private companies?

Professor Justin Fisher: It is not just me who has concerns about triggering. In February 2000 in the House, Mr. Linton said:
Candidates can have a real problem in not knowing when their candidacy starts and perhaps inadvertently forgetting to use the word prospective.[Official Report, Standing Committee G, 10 February 2000; c. 365.]
It is a common problem.
In response to your other two points and whether to use four months or 365 days, my concern with 365 days is that it would make legislative sense in some sense to unify the times, but there is a great problem in over-regulating local party activity. We do not want to strangle the communications between parties and electors in advance of the election. Electors respond to thatwhere campaigns are more intense, there is higher turn-out.
In terms of aggregating the spend, in one sense again that would make for a convenient solution. The problem is that all that would happen is that the money would be spent in about 150 seats, and the other parliamentary seats would simply be ignored, so while it would be convenient in legislative terms, it would produce adverse consequences. My proposal of four months is a compromise; it is the most workable solution in an imperfect world.

Professor Keith Ewing: The answer to the question is in paragraph 10 of my submission. What has happened is that a number of satellite organisations have emerged around political parties. The best way to deal with that is to say that we need to extend the scope of the regulations, so that they apply not only to political parties, but to what I call related entities and what the Australians call associated entities. That way, bodies such as unincorporated corporations and, in some cases, private companies, which exist principally to fund, raise money for, or provide services to parties, would be subject to the same financial accountability as political parties. That means annual filing of income and expenditure and better regulation of the transparency of donations.
In terms of private companies, there is an issue there too. I would deal with it by going back to the Neill committee recommendation and saying that private companies can give money to political parties only from trading income that is generated from activity in this country. I would go further still, and say that only private companies that are owned wholly or mainly by a permissible donor should be allowed to give to a political party. We need to tighten up on that in order to be faithful to the Neill committee position, and I would do it in the ways that I have set out.

Q 9

Eleanor Laing: We have had in recent times two general elections that have been fought with triggering, and others still in recent memory that were fought without it, such as the one in 2000 that Mr. Linton referred to in the quote that Professor Fisher gave. As distinguished academics, are any of you aware of an assessment or a comparison having been made of the effects of one type of election or another?

Professor Justin Fisher: It is difficult to make that assessment because it is only since the introduction of the current rules, under which candidate expenses begin at the point of dissolution, that we have had an electoral commission taking a broad overview. To be honest, the system prior to the 2000 Act was slapdash and subject to minimal oversight, which is almost certainly why there has been only one case in living memorythe case in Newark. I would stress that my point is not that the current system is perfect. The Bill is correct to assert that there is a problem with significant pre-campaign spend. My point is that triggering is the wrong way to go about it, because it would create more uncertainty and potentially less transparency, and therefore a lack of confidence in the system.

Eleanor Laing: For clarity, what is the right way to go about it?

Professor Justin Fisher: In my view there is no perfect option, but the least bad option is the proposal originally included in the Electoral Administration Act 2006. That assumes that general elections tend to be in the first week of May, and that therefore 1 January is the start date, giving a period of four months. That is the least bad option, but on balance it is probably the best of the options on the table.

Q 10

Michael Wills: I have brief points of clarification for Professor Ewing and Professor Fisher, but I would like to offer a summary assurance to Dr. Pinto-Duschinsky, who raised a valuable point about the legislative process. We should be clear that our discussion today relates only to amendments that arise out of the evidence that we have heard, out of this relatively new process. There will be plenty of time for amendments to be tabled on Report, for example. The Government have made it clear that as long as other members of the Committee come forward with proposals that are consonant with the overall objectives of the Bill, we will be flexible and accommodating as far as we can be.
I want to pick up two points. Professor Fisher, your remarks about minority parties and what you assume to be their reaction to proposals by party leaders suggest that you expect such commissioners to operate on a partisan basis. Do you agree that those with recent political experience could contribute to the work of the commission in an impartial and non-partisan way?

Professor Justin Fisher: In an ideal world, that would be the case. Unfortunately, the basis on which the parties are selected suggests that the Government do not believe that that could be the case. It would be guaranteeing a place for the three principal parties. If I may say so, Minister, your reference to the parties as minor parties says everything about what is wrong with the proposals.

Q 11

Michael Wills: Minority.

Professor Justin Fisher: But, within their respective countries, they are not minority parties. I need hardly remind you that the Scottish National party is in power in Scotland.

Q 12

Michael Wills: Thank you very much. I am sure that we shall return to that point later in Committee.

Professor Justin Fisher: I shall clarify matters. If you are to have political commissioners, you need to recognise that the world exists beyond Westminster.

Q 13

Michael Wills: As I say, we shall return to the matter. I am grateful for your contribution. I am conscious of the time and the fact that others still want to come in.
Professor Ewing, you made a good point about regulators regulating themselves. Aside from the fact that only four out of the 10 commissioners would be appointed in the proposed way and the rest of them would not have had political experience, do you agree that, if a person had recent political experience and is not currently an elected politician or seeking election, that would not be a case of the regulators regulating themselves?

Professor Keith Ewing: No, I do not agree. I do not know who you have in mind to make the appointments and, in a sense, that is another problem. The idea was that those who would be appointed would have experience in running national elections or perhaps raising money for political parties. If you intend to appoint people with that level of expertisepeople who have committed their whole professional life to the work of a political partyit is difficult to expect them to put their experience and that commitment behind them when taking on such work. From being close to politicians and people who are active in the political process, I know that political commitment runs deep in the individuals concerned. It is unrealistic to expect people in such positions to put such interests behind them, when operating in those situations.
To come back to the point that Michael made earlier, the Federal Election Commission in the United States consists exclusively of members of political parties. That would not be a good model for us to follow. There are problems with the American system because the regulator community is regulated by itself. A group of four people out of 10 is quite a lot.

Michael Wills: We are not following the American model, but thank you very much.

Q 14

Eleanor Laing: On that very point, are you suggesting, Professor Ewing, that people who have stood for election, been elected or taken part in electionsthe only people who, by definition, have gone through the unique experience of the election processare, by nature of their belief in a political ideal, in some way untrustworthy and incapable of behaving in an impartial manner? It seems that that is what you are suggesting.

Professor Keith Ewing: With great respect, I cannot see how you can possibly construe that from what I said. It is unrealistic to expect people who have spent their lives in politics in a partisan capacity to put all that behind them when they move to the post of commissioner. However, your point is a good one in that it would be helpful to the commission to have the kind of experience to which you refer. Provision was made for that in the Act by the creation of the parliamentary parties panel. That was designed to create a dialogue between an independent commission and people who have partisan political experience on behalf of the political parties. The question that you might want to ask the commission and the parties is, why has that system failed? It was designed to fill the knowledge gap that is now said to exist.

Q 15

Eleanor Laing: I wonder whether the other gentlemen agree with that point of view.

Michael Pinto-Duschinsky: I have been less exercised by this question of political commissioners than others. To me, it is partly a matter of the political stance of the commission itself. If the commission were truly independent, it would be ideal not to have political commissioners, but I have had the feeling that at certain timesindeed, I have been informed of this by members of the commissionthat its budget has relied to a considerable extent on Government favour, and that it therefore needs to accommodate itself to Government views.
That danger exists in many commissions in relation to ensuring that they are independent. If we could be quite confident that there were no pressures on an electoral commission, it would be ideal to have it as totally an expert commission. If, however, there are political elements involved, having a cross-party element becomes useful, as is the case with the Committee on Standards in Public Life.

Q 16

Tony Lloyd: Briefly, if I understood Professor Ewing correctly, he was suggesting that unincorporated associations, dinner clubs and so on should have a duty to report just as a political party has a duty to report, so that they would have to account for their donors in the same way. Obviously, that is to avoid the loophole that we cannot trace the original donor. What would be the trigger for a company or a dinner club to be considered reportable? Have Professor Ewing or other members of the panel given any thought to that?

Professor Keith Ewing: The legislation should apply, as I said earlier, not just to political parties, but to entities that are in some way related to a political party and that are not currently regulated.

Tony Lloyd: May I make it clear what I am asking? It is about avoiding a loophole within the loophole. Obviously, if I had an unincorporated association and I said that 27 per cent. of its activities were commercial trading activities, it would be clear that it was substantially a donating body, but there must come a point at which

Professor Keith Ewing: Well, it would depend on the circumstances. What we are trying to do here, which people have lost sight of, is create a workable system, not a perfect system. Too many people are looking for perfection in an area where, frankly, it is impossible.
What I would say as a starting point is that any entity whose principal purposes included raising funds for or providing services to a political party, whether on commercial terms or not, should be subject to the same forms of transparency obligation as a political party. Basically, that would prevent a political party from offshoring some of those activities, as it can do currently.

Nicholas Winterton: Professor Fisher, do you agree with that?

Professor Justin Fisher: Wholeheartedly. The only area where I would differ from Keith is the idea of defining unincorporated associations as linked to political parties. It would be far easier simply to place the same reporting requirements on collective bodies that made donations, and therefore the trigger would be whatever sum was in place for donations to political parties. It is a matter of transparency, rather than of defining the organisation. I would support that; I think it is a good idea.

Nicholas Winterton: Mr. Pinto-Duschinsky, in 30 seconds?

Michael Pinto-Duschinsky: This is a very complicated area, which Mr. Lloyd has done well to bring to our attention. At the moment, the triggering for third parties and their donations to political parties under the 2000 Act is very unsatisfactory. The wording is different from the recommendation in the 1998 Neill committee report. The consequence of making that triggering more effective would be to bring vast numbers of bodies under control.

Nicholas Winterton: We have reached the appropriate time, 2 oclock. I want to apologise to our very distinguished and helpful witnesses for slightly short-changing them by having points of order at the beginning of this evidence session. I am afraid that I am here merely to try to keep the peace between all parts of the Committee and to achieve progress. I had to take the points of order, which were very valid.
I thank Professor Ewing, Professor Fisher and Mr. Pinto-Duschinsky very much, not only for the articles that they have written, but for the valuable evidence that they have given us this afternoon. On behalf of all members of the Committee, I thank you most warmly.
As we change over to our witnesses from the Conservative party, the Labour party and the Liberal Democrats, I want to say to the Committee that, if it wants, it can carry on sitting after the evidence session ends at 3 oclock. However, it would continue to be a public sitting to deal with points of order, if that is required. I say that now so that people do not feel inhibited, frustrated or impatient. As I say, we can sit for a short while after the evidence session has ended.

James Duddridge: At this stage, Sir Nicholas, we certainly do not intend troubling you any further today on the issues that have already been raised. I think that you made yourself very clear earlier, and we thank you for that.

Nicholas Winterton: I am most grateful that you will not be troubling me further today. Thank you very much indeed. However, I wanted to make those remarks because I try to be as flexible as possible to accommodate the concerns of the Committee.
I now welcome our new witnesses: Ian McIsaac, financial director and registered party treasurer of the Conservative party, whom I know; Roy Kennedy, director of finance and compliance for the Labour party; and Hilary Stephenson, director of campaigns for the Liberal Democrats. I say to you, as I say to all witnesses, that I try to give Her Majestys Opposition, the Liberal Democrats and the Government party as much opportunity as possible to put questions, but I always start with the spokesman for Her Majestys Opposition, who today is Jonathan Djanogly.

Q 17

Jonathan Djanogly: Thank you, Sir Nicholas, and good afternoon to you all. I think it would be a fitting start if I asked you, in turn, what you like and do not like about the Bill. Ian McIsaac first, please.

Ian McIsaac: I am relatively new to the political process, so I do not have a lot to say about triggering, which came into existence long before I got involved in politics. I have no idea how it used to work or how it might work, so I have no real opinion on that issue, save to say, obviously, that I was part of the Hayden Phillips discussions and we did not really turn our attention to it at any point. As I say, I have no comment about triggering.
Working backwards, regarding the Electoral Commission, there are some good things in the Bill in terms of the ability to give a proportionate response to potential regulatory error. On the other hand, some things could be considered somewhat draconian by some people. That takes me to one of the main points that I would like to make, about volunteerism. On the question about declarations, I think that is very problematic indeed and I wonder whether it achieves its stated objective.

Nicholas Winterton: Any further questions, Mr. Djanogly?

Q 18

Jonathan Djanogly: I would like to put that question to each of the three panellists.

Nicholas Winterton: Witnesses. [Laughter.] They may be candidates in the future.

Jonathan Djanogly: Sorry. I said panellists.

Nicholas Winterton: I will move from left to right and ask Hilary Stephenson to respond.

Hilary Stephenson: I am absolutely not a candidate. I give a cautious welcome to political commissioners in the sense of bringing in some first-hand expertise on how things work and perhaps improving the enforceability and practicality of some decisions. Obviously there is the need for public reassurance in such matters, too. We certainly welcome the discussion of donation and spending caps, which I assume we shall be asked about in more detail later. Our particular concern is the proposal to return to the trigger. It does not address the main issues that need to be dealt with in terms of transparency and a level playing field. It would deal only with candidate spending, not party spending, which is our main concern.
In summary, we welcome the focus on spending caps and donations. We would be worried about a move to reintroduce triggering. That was always uncertain, and it caused many problems for agents and volunteers. It is probably made worse in the current circumstances by the fact that we have almost continuous party campaigning for various elections nowadaysmore than we used to have. Making the distinction between where one election ends and another starts is becoming increasingly unrealistic.

Roy Kennedy: I welcome the proposal for political commissioners. I am a member of the political parties panel, so I meet the commission regularly. I heard what was said earlier about how people involved in political life are honourable. I believe that people can become political commissioners and look at things honourably and properly, and give the view of the volunteer. All our parties are volunteer armies. As a political parties panel, in many cases we have had many years of major agreement about how things affect the volunteers and members on the ground. I welcome that very much.
We have concerns about the transparency of donations. We welcome the idea of having a certificate in respect of donations. The sum of £200 is too small and we should be looking at increasing it. As you probably know, £200 is the recordable amount in making donations. There are then the sums of £1,000 and £5,000 reportable locally and nationally. It might be more sensible to move to those figures, rather than £200, again on the basis of getting volunteers involved. I have some reservations about what are the reasonable steps to take to verify when the certificate has been handed to us. How do we deal with that?
As for the trigger, it cannot be right that, outside the period when the election is called, we have an unregulated period in which candidates can spend money. We have the national limit, which is about £19 million. The candidate spending limit is roughly £12,000 in their constituency. The trigger is one option. It was in place before the 2000 Act. Okay, there might be other options. I heard about the option of a year, or possibly one of four months. They might be explored, but some proposal to control that spending must be right.

Q 19

Jonathan Djanogly: Each of you has, in different ways, mentioned the importance of the volunteer element of what you do. I should like to think that we all respect that. Looking specifically at clause 8, entitled
Declaration as to source of donation,
comments were made that there are problems with that in respect of motivational issues. It might be helpful to put on the record what actually happens in procedural terms when someone wants to make a donation at the current time. What mechanics do you go through that we should be worried about or have to think about?

Ian McIsaac: Are you asking about now?

Jonathan Djanogly: At the moment.

Ian McIsaac: Any donation in excess of £200 can be accepted only if it is from a permissible donor, so we have to ask what a permissible donor is. The law requires us to verify the identity of that personwe do that through the electoral register or, if it is a company, through Companies House. They are not necessarily a perfect way of identifying, and we would not necessarily find someone who was determined to pass themselves off, but that is what we do. The electoral register is a finite thing, which exists, albeit that it needs to be updated. It is somewhere we can go to verify that a person exists. If the amount is more than £200, it needs to be recorded, with the cheques banked and so on. It is a simple process really. An individual, if on the electoral register, is entitled to make a donation. We encourage them to do so and, indeed, many thousands of donations of more than £200 are made each year.

Q 20

Jonathan Djanogly: What are your problems with this clause?

Ian McIsaac: Think about a party such as ours. We have 600 and something constituency associations, of which about 350 put in financial statements, which means that they have income in excess of £25,000 a year. Only a very small number of them have professional staff, and the rest are run by volunteers. Typically, the constituency chairman, who is the registered treasurer for the purposes of our constitution, would tend to be someone who is probably retired, possibly elderly and not necessarily with a background in financial servicesthey are not forensic accountants or anything of that sort, but teachers, councillors and so on. At the moment, it is a very mechanical process; it is very easy. Are they on the electoral register or not? There is a help desk in central office, so we can help them with that.
Once you start getting into areas of judgment it gets more difficult. This legislation has words such as
think that the declaration was untruthful...suspected to be untruthful.
That is anti-money laundering languageI am afraid that my professional practice unfortunately got me involved in anti-money laundering stuff, quite a lot. I checked out the joint money laundering steering group guidance noteshere they are, 159 pages long, including things such as customer due diligence, how to identify your customer or how to identify their money. All these things are highly judgmental and very difficult. You can imagine yourself, or your parents, being asked to become chairman of the local constituency associationnot necessarily mine, but Lib Dem or Labour as welland then being told, By the way, there is a bit of a snag. There is the compliance manual. And, by the way, you ought to be aware that if you make a mistake, albeit an innocent one, it could be looked at through the eyes of someone who is very suspicious. Also, be aware that the Electoral Commission has all sorts of powers to gain access to your home and to look at your records. By the way, you do want to be the chairman of the association, dont you?
That is the sort of problem; it is not easy. Then that comes up to me. I had a line with Sir Hayden Phillips, that if that were required, I am not sure that Mrs. McIsaac would allow me to carry on with the job. I mean that very sincerely, because the way that the legislationthe Political Parties, Elections and Referendums Act 2000is written, the registered treasurer takes responsibility for the compliance of all the associations. You can see the pictureslightly elderly chairman, no professional staff, people who come in three days a week, and so on and so forthbut every quarter I have to sign off the donation report. I have to rely on these people. I can do that now, basically because the electoral register exists. It is a mechanical thing to check it. If, on the other hand, I want to rely on the quick-wittedness of those in the associations to spot something that they suspect to be untruthful, or ought to suspect to be untruthful, I am starting to get into serious difficulty.
You can see the pattern. There is the whole verification area, the judgmentalism and the lack of staff. A large investment bank that I dealt with when in professional practice had more than 1,000 people in compliance and legalnot risk. I think of the Conservative party, and we have a handful.

Q 21

Jonathan Djanogly: Thank you. Would either of the other two witnesses like to add to that?

Hilary Stephenson: Yes. I wholeheartedly endorse a great deal of that. It was all very true to me. Finding treasurers, even under the past decade of legislation, has become more difficult. We are changing a culture with those peoplein the way that election agents are quite used to some of those compliance-type things, while treasurers traditionally have not been. To add something else on top, another burden at this stage, would make quite a difficulty, although in practice I think that the outcomes of this could be laudablewhere we are trying to go. If the amount at which this was triggered was higher, the problems might be minimised.

Roy Kennedy: My experiences are similar. Getting treasurers to do this work is always difficult and getting a constituency officer is obviously difficult. We have local constituency Labour parties that send all their reports to our head office, either online or on paper, for donations of £200 and above. We collate loads of stuff and then the checks are made: are they on the register? If it is a company, is it registered? Are they registered through a trade union? We can find those things, they are there and can easily be found. Going beyond that, the question of reasonable steps and so on is a much more unclear area for us, so we have some concerns there and that area needs to be thought through further. On the raising of earnings, as I said in my earlier submission, it should be raised at least to £1,000 or £5,000 at both local and national levels.

Q 22

David Howarth: May I come back to something that Hilary Stephenson said on the spending side? It was very striking, and I would like to have your reaction to it. She said that campaigning is now all the time, not just at elections, and that it is difficult to tell the difference between campaigning for one election and another. My experience is similar to that. If that is so, does not that mean that the idea of controlling election spending through candidate spending near the time of the poll is a 19th-century approach to a 21st-century problem, and that what we should be looking at is something like the Hayden Phillips global spending cap approach, throughout the electoral cycle? Taking into account what you have just said about the problems of compliance and voluntarism, there should be some way of dividing that up into a local cap too, so that it is comprehensive and does not depend on the accidents of when a general election might occur.

Nicholas Winterton: I call Hilary Stephenson, if that was directed to her?

David Howarth: It was directed to the other two witnesses, because I was taking up what she said and putting it back to them.

Nicholas Winterton: Let us start with Mr. McIsaac.

Ian McIsaac: Can you just clarify the precise question?

Q 23

David Howarth: Is it the experience of your party that campaigning is constant and undifferentiated between elections? If so, is it the case that if we are to control campaign spending, we must control it all the time?

Ian McIsaac: I assume that that must be right, because the same people are doing the campaigning and they are campaigning for all the elections that are relevant. There are the European elections coming up, the local government elections, parliamentary by-elections, general elections and so on, so what you say has to be correct. As for the way in which the money is divided up, I understand that the current system is fairly straightforward. Not being a candidate, I would not know about the Representation of the People Act, but I am aware of it. We know about that and that is how we manage it. I do not know whether the money could be divided up into different pots. Already, there are different limits on, for example, the European elections and by-elections and so on, but you are quite right that there is a degree of artificiality about it. Unless people keep timesheets, you will never find out what they are getting up to and even then, from my experience of timesheets, you cannot necessarily agree with them.

Roy Kennedy: The point made earlier was that there is an unregulated period local spend but a national cap of £30,000 per constituency, which is roughly £90 million. You then have the local candidate limit at the election time itself, which has been in force for many years, but then you have a whole period that is not regulated at all, so your campaigning goes on. People are now campaigning constantly for elections that could be many years in advance and for all sorts of different elections that take place each year. That period is unregulated and it should be regulated.

Q 24

Andrew Tyrie: It might be helpful if people amplified their answers to one part of Davids question, which is: in practice, is it feasible to try to divvy up a global cap that might run for the life of a Parliament between hundreds of individual associations646 constituencies, or whatevergiven the scope for being active in one period but in fact being active in another? I ask that because I know that this was discussed as part of the Hayden Phillips process, which I participated in. Hayden himself became sceptical about the feasibility, which is why he was seriously discussing only the development of a global cap.

Roy Kennedy: I do not know. We should look for a way of controlling regular local spend. We could find a system. We have the national spend, as you know, at the time of the election. Perhaps we could find a way of doing the regular spendthere may be other ways. I think that we can work together and find a formula or a procedure that deals with that, so that we control spending in a constituency year on year. That must be a good thing, if we can get there.

Ian McIsaac: Andrew Tyrie knows that I was present at those discussions as well, and all the parties agreed that it was impractical to seek to control spending constituency by constituency, without changing the constitution of the parties concernedobviously the Conservative partyand bringing in accounting systems of some sophistication to deal with that. It is a complicated beast, when you think about ita party of several hundred autonomous associations having to march together, be individually controlled, and then controlled as a group. So, who is going to do the controlling? Who is going to be responsible if it goes wrong? The chairman and the officers change every three yearsit is not an even cycle. Who do you point the finger at when somebody has overspent? Who is going to take responsibility for that? As I say, we came to the conclusion that although theoretically it may seem an attractive solution, it is practically impossible to do it in a way that can be implemented.

Hilary Stephenson: Surely this comes down to it certainly being an extra burden on the party nationally, but that does not necessarily mean that it is an impossible thing to do. This is not ever going to be perfect, however we do it. It would mean that we were regulating expenditure over a periodnot getting into some of those rather uncomfortable territories of what defines the trigger of this or the start of thatand we would not have a big unregulated period somewhere in the process. I tend to think that it is worth seriously looking at just how practical this is, and that it is somewhat more practical, perhaps, than colleagues have said.

Q 25

Tony Lloyd: I want to pick up on a couple of comments that have been made by the different party representatives about the difficulty of policing donations. I think that Roy Kennedy said that there is a good argument for raising the limit from the current £200 to £1,000.

Roy Kennedy: It is £1,000 locally and £5,000 nationally. That is really important.

Tony Lloyd: So, the first part of my question is whether there would be rough agreement across the political parties for that kind of approach. Ian McIsaac mentioned the difficulty at local level, which most of us who have had practical experience of local parties would understand. At the other extreme is the more contentious policing of the irregular donorthe foreign donation, or whatever. Those donations do not tend to be the £201 ones; they tend to be significantly more. Is there any reason to believe that the political parties have a problem checking out the eligibility of donors regarding their taxation and residency status, and their registration on our electoral registers? In essence, there are clear concerns that foreign donations still come into our system. Do the political parties adequately police at that top level? So, the small issue is whether we should be raising the limits and whether the parties can agree on what they should be, and the big one is why we cannot get our collective houses in order and stop the irregular donors coming through.

Ian McIsaac: I think that your question is about the bottom-up and the top-down. I will deal with the bottom-up first. The larger the limit, the smaller the number of donations involved and therefore the smaller the problem. The principle remains exactly the same. The principle is that volunteers out in their constituency associations are not equipped to verify the origins of donations or to know to the point of being able to challenge a declaration whether someone is giving their own money or someone elses. That is the real problem.
With regard to large amounts and tax residence, which you mentioned, I am not aware of any way you could find out a companys tax residence without going to the Inland Revenue, and obviously its information is confidential. I also have bitter personal experience of trying to find out who controls companies when you go way up the line. In one sense, the only way to do that is by checking against the information available, which is the companies registry. I do not know, for example, whether BP is a British company. How would you define that? Are the majority of the shareholders British or foreign, or are they a mixture? That is a very difficult problem. Tracing money through major insolvencies, which I have had a lot of experience of, is very difficult. It is hard enough for a large firm of forensic accountants to track that down, but to put that sort of burden on a volunteer or a registered treasurer is very difficult.

Hilary Stephenson: On the bottom-up question on the extra burden of verifying donations, I think that a higher limit of £1,000 or £5,000 would help to minimise the problem. From the point of view of local treasurers, I understand that the main thing they are required to do is to require extra verification from the donor, rather than to do a huge investigative job. It would be helpful if there were fewer occasions when they have to do that, but in principle I do not see that as a huge problem.
At the top end, I am not a party treasurer or financial expert on that part, so I acknowledge how difficult that verification is. However, if we simplified things so that it was clear that donations from a company controlled by an impermissible or foreign donor were impermissible, regardless of whether that company was arguably in the UK, that might help to clarify the situation, reassure the public and make it easier to administer.

Roy Kennedy: Obviously, I would like to see the local limit raised. We made the point several times about our volunteers being able to do that properly, so I think that raising the limit is important. With regard to being able to comply with the legislation, we also need clarity and certainty on the sources we are using to verify it. Every party has to submit its return every quarter and be confident, when things are being checked and looked at, that they have gone to sources that can be relied on, and then it can be accepted that they have done those checks. In terms of big amounts of money, we again need certainty that we can go to the source to confirm that the money has come from where it is said to have come from. So we need certainty and clarity.

Q 26

Tony Lloyd: In terms of the large national donors, I take Ian McIsaacs point, which the other witnesses generally concurred with, that there are difficulties in tracing things through. I appreciate the genuine problems in that. Do the parties now routinely ask those large donors to assert their ability to make a donation under existing law?

Ian McIsaac: We know our donors over a certain levelit is obviously a reasonably high level because we cannot know them all. So we are aware of the sort of people we are dealing with and their background. By and large, we have personal knowledge of our donors, which is helpful, certainly when it comes to individuals. We are quite satisfied, for example, that we are getting money from the business man, rather than his chauffeur.
When it comes to companies, however, we have to stick to the law, which means being satisfied that the company is incorporated in the European Union, registered in the UK and carrying on business in the UK. Carrying on business is a term of art rather than science. Sometimes we can be satisfied by checking the company accounts. If they appear to show trading activity, that will satisfy the requirement, and that is the final tick in the box. Where we cannot see company accounts, whether that is because a company is a start-up or it has not finished its first year or they are late, or whatever, we would, for example, take a statement from the independent auditors saying that they are carrying on business. So the answer to your question is, yes, we take the matter very seriously indeed, but we do not routinely check back through some chain of ownership, because we do not have the ability to do that, nor does the law, at the moment, require it.

Hilary Stephenson: This is not my field, in detail, but I know that we take serious steps to do the things that the law requires us to do at the moment. Of course, it does not require us to backtrack through the various layers; that is the point I was making. That could, perhaps, be clarified.

Roy Kennedy: We take our responsibilities on this matter seriously, as well. We know, nationally, about donors at a certain level and we take responsibility and acknowledge them. We check what we need to check there to ensure that we are meeting our responsibilities seriously and properly so that we are submitting a proper return each quarter.

Q 27

Eleanor Laing: Can I take you to triggering and spending money rather than raising it? I appreciate that Mr. McIsaac has said that this is not his expert area, so perhaps I had better address my question to the other people before us.
We have spoken a bit during these Committee proceedings about the lack of clarity in the Bill and the uncertainty as far as triggering is concerned. I wonder if you have had any chance to consider the disproportionate effect that the Bill might have on a candidate, as opposed to a Member of Parliament?
I put it to the Secretary of State two days ago that, in my constituency, for example, I am the MP and am represented as the MP: I get coverage in the papers, and so on, and I can send out literature as a Member of Parliament. Could a candidate standing against me find that he or she has spent to the limit of the election expenses and, discovering that this Bill applies, therefore not be able to campaign in the period immediately before a general election?

Roy Kennedy: Assuming this Bill becomes law, yes, we will have to go through the processes. It is not retrospective, but will be going forward, so I assume that what will happen then is that the commission would give advice and guidance to parties and candidates on how to operate. So anything that has happened in the past would not count and everyone would have the advice on how to operate, moving forward. I do not see the point you are making.

Q 28

Eleanor Laing: You are assuming that it will not have a retrospective effect.

Roy Kennedy: Yes.

Q 29

Eleanor Laing: But we have advice that it could have a retrospective effect; that was my concern. Would you then be concerned for your candidates? I know that that is not a fair question.

Q 30

Nicholas Winterton: Do any of the other witnessesHilary Stephenson or Ian McIsaac, wish to comment on what Eleanor Laing has said? Do they foresee a problem?

Hilary Stephenson: If it was retrospective, most certainly I see a problem. I do not think that there is an intrinsic problem with the triggering in respect of inequality in any case between incumbents and candidates. That would be much worse, should it be retrospective.

Q 31

Eleanor Laing: But could it not have retrospective effect, because we do not know exactly what the triggering rules are as they are so unclear, or are you certain, at the moment, how you would advise candidates to behave to ensure that they do not trigger? With the triggering rules being so unclear, if they are clarified at some pointperhaps by a court judgment or by the Electoral Commission, or in some other wayyou may discover that you have candidates who have inadvertently, but undoubtedly, triggered some months previously. They might have spent £10,000 in that time. Therefore, in the few months before a general election they would not be allowed to spend another penny. Could that not happen?

Roy Kennedy: It could happen, of course. With triggering, it would be in force and I assume it would be retrospective, although I would not want it to be retrospective. We would seek advice from the commission and other partners would do the same. Then we would give that advice to our candidates and parties. We would do training as well to make sure that people did not get themselves caught there. Potentially, if the trigger is brought in, somebody might, at some point, trigger themselves.

Q 32

Eleanor Laing: Somebody might already have triggered by now.

Roy Kennedy: If it is not retrospective, they would not have done, would they?

Q 33

Eleanor Laing: It is not fair to take you further on that because it is a question that we spoke about on Tuesday to the lawyers on the Bill .

Nicholas Winterton: Mr. McIsaac, you are the only one who has not commented on this.

Ian McIsaac: Obviously, I do not have the detailed knowledge of my colleagues. While, as finance director, I would welcome anything that prevents people from spending money, I can see that, on this occasion, that could give rise to a lot of inequity.
Picking up your point, at the end of the day there will presumably be a judge who decides, if push comes to shove. No amount of guidance can necessarily determine that outcome. Unless someones liberty or membership of the House of Commons is concerned, I would have thought that leaving any uncertainty where a judge might come to a different conclusion would be very damaging.

Nicholas Winterton: I have to be entirely impartial in the Chair, but it seems to me, with the Minister sitting on my right, that this is perhaps a matter to which he may well direct his attention during the debate in Committee.

Q 34

Martin Linton: I was fascinated to discover that Mr. McIsaac has experience from a previous job of money-laundering.

Ian McIsaac: Anti-money-laundering.

Q 35

Martin Linton: I am not suggesting for a moment that that is relevant to your current job, but it might help you to explain to us the complexities of some of these issues to do with companies.
I have two particular problems with the Bill. One concerns these unincorporated associations and private companies, which are effectively excluded. Some of them, such as Midlands Industrial Council and Bearwood, have made donations of well over £1 million, so it is fair to assume that within that there might be donations well over the £5,000 declarable level.
I would like to hear your opinion of the idea of having declarations of the true individual source of donations over £5,000, even though they might be given through an unincorporated association or private company.
My second question relates to donations that a person or his party might receive, which are intended for a particular donee. I know that donations have been canvassed, for instance, for members of staff of George Osborne, the shadow Chancellor, which is perfectly legal and above board. As I understand it, these are declared in the Electoral Commission accounts, as opposed to the House of Commons register, as donations to the Conservative party, so there is no indication there that they are given for the shadow Chancellors staff. That raises all sorts of issues about shadow Ministers and their accountability. I wonder whether he would welcome a change in the law that would make that more explicit. I know that he wrote to the Electoral Commission saying that this money is, at the moment, commingled with other funds, not segregated. These people are employed by the Conservative party, so all the money goes into the same pot.

Nicholas Winterton: Order. I am extremely patient. I did ask for succinct questions to our witnesses.

Martin Linton: I have asked some questions.

Nicholas Winterton: This appears to be a speech. I am speaking not to you, Mr. McIsaac, but to Mr. Linton.

Ian McIsaac: Shall I answer your three questions? The first concerned companies. Obviously, we go through the process that I have mentioned to you. If a company is an agent for another donor, the company already has a legal obligation to declare that to me. If it does not, it commits an offence. We draw the attention of our donors to that, where we believe it to be relevant.
You mentioned also an unincorporated associationa particular oneand again the law is quite clear: where the unincorporated association is acting as an agent for one of its members, it is the member who has made the donation, not the unincorporated association. In fact, the particular entity you mentioned has been reviewed by the Electoral Commission. Those suggestions were made, and were signed off by the commission.

Q 36

Martin Linton: I am asking not whether it obeys the letter of the current lawI am taking it for granted that it doesbut about possible changes to the law that would make it more explicit.

Ian McIsaac: The issue really is whether a piece of paper saying, By the way, you know that that is the law really, dont you? is sufficient. I think that, by and large, people know that it is the law, but a large organisation could deal with that. I would be surprised if anything changed, and if they suddenly said, Oh, now that I must sign a declaration, let me come clean. It wasnt my money at all; it was someone elses.

Q 37

Martin Linton: Clearly, if the money was not sent in that way, it would have to be declared, and the individuals identity would have to be declared.

Ian McIsaac: That happens already in the case of the association you mentioned. Individuals request it to be passed to the Conservative party. We record that as being a donation from the individual, not the association. It is clear that that is happening.
On the final point you mention, it would be useful to have clarity when money has been given to the party with a wish attached to it that it be used to support a member of staff working in someones office. The Electoral Commission guidance seems to suggest that if it is supporting the role of an MPhis party role as a shadow Ministerthe party should declare it to the Electoral Commission. When it is supporting the MP as a constituency MP, it is the regulated donee, the MP, who should report it to the commission. It is, interestingly, whoever receives the money.
That seems to be the guidance on the Electoral Commission website, and that is the guidance on which we base our actions. It is slightly unsatisfactory, because there could be a situation in which an MP receives money, but the party has the obligation to report it, or the party may receive money and the MP may have the obligation to report it. That is separate from the Register of Members Interests to which the MP, as a matter of good sense and good dealing with the House, will report it, whoever received it.

Q 38

Martin Linton: But you would not have any objection if it was made clear in law that when a donation was made for a particular donee, that should be made clear in the party accounts.

Ian McIsaac: You say the party accounts. I

Q 39

Martin Linton: In the party declaration of donations, in the register of donations.

Ian McIsaac: My difficulty is that when someone pays money to the party, and I bank it and commingle it with party funds, that money ceases to exist. I may be able to follow that wish, or I may not. It is rather like a charity when someone says, Here is some money; I want it to be used for building a certain dam, and for no other purpose. If the project is cancelled, the money must be sent back. Or someone may say, I would like it to be used for a purpose similar to that, following your normal charitable objectives. One is trust money, which is very specific, and the other is general support with a wish that it support a particular objective.
The matter is slightly more complicated than that, but I see where you are coming from. By and large, MPs do report donations to the Register of Members Interests, so there is transparency and clarity.

Q 40

Martin Linton: Are you satisfied that the money from Bearwood is from a legal donor?

Ian McIsaac: If I was not satisfied, I would not be here; I would be in Wormwood Scrubs.

Nicholas Winterton: A very good answer.
Hilary Stephenson, have you anything to say to Mr. Linton on behalf of the Liberal Democrats?

Hilary Stephenson: There are essentially two things: the source of the money and the application of it. On sourcing, we are very much of the view that the purpose of legislation and the requirement for public reassurance are about ensuring that we have law that gets us back to the source of the money. That clarification would be welcome.
On particular donations for particular purposes, at the moment I cannot think of an example in which that applies. I can see that there might be some difficulties in some cases, but in principle it is a good thing that it should be clear whether such conditions are made.

Roy Kennedy: My view is similar. I obviously welcome transparency, and it is important to be clear about where money comes from. A declaration of assets will help with that. It will determine where the money has come from. There will be particular uses. If that is the case, it should be stipulated as well.

Nicholas Winterton: Three people have caught my eye; the first is David Howarth.

David Howarth: My question has been answered.

Q 41

Tony Lloyd: I have a specific question for Ian McIsaac, which is the stem of a general question for everybody. Mr. McIsaac said to us a few moments ago that where there was no unincorporated association, one would seek to know who the individuals who made a contribution through that association were. Do you make a public declaration on who those people are?

Ian McIsaac: I did not intend to say that. I intended to say, and I think that I did say, that when an individual instructs or requests the unincorporated association to pay the money over to my party, it is recorded as an amount coming from that donor, not from the unincorporated association.

Tony Lloyd: And is registered with the

Ian McIsaac: And is registered by me with the Electoral Commission as coming from that donor. If the unincorporated association is a members association, that association itself has the obligation to declare all amounts over £5,000 directly to the Electoral Commission.

Q 42

Tony Lloyd: In fact, that moves us on to a more general question. In the previous sitting, Professor Ewing suggested that all associations and equivalent bodies ought to have a statutory duty to act, so that they police the donations going through those bodies in the first instance. Mr. McIsaac, you indicated that unincorporated associations do that, but I am not clear that that is the case. I would be grateful for your view on whether they already have that legal obligation.

Ian McIsaac: They have the obligation, because it is in the law. I can only assume that they discharge their obligation. I have no reason to believe that they do not. The association that your colleague mentioned earlier is well aware of that, and the Electoral Commission has reviewed that issue with it and has satisfied itself that that is what happens.

Q 43

Tony Lloyd: That it is a regulated donee?

Ian McIsaac: No, it would be a regulated donee if it was a members association. That particular one is not a members association, but others are. Unincorporated association is the umbrella term and the members association is a subset of that.

Q 44

Tony Lloyd: That is helpful in clarifying the position. Professor Ewing suggested that for those bodies that do not have a legal obligation to declare the sources of their income, there is inevitable concern about whether the ultimate sources of the donations are compatible with the law, even though they may have a legal structure. Should we force all such unincorporated associations to register and provide details of their donations, so that they have the duty to police the situation? Would the various parties support that?

Ian McIsaac: I heard that. I assume therefore that there would also be obligations to file financial statements. The Electoral Commission now wishes to standardise those and incorporate them into regulations, with regulatory sanctions. Baring in mind that when I went on to the Electoral Commission website this morning and looked up unincorporated associations, I found that even my colleagues to my left accept donations from unincorporated associations. One of them accepted £1,072 and the other £754. That is apart from my party.

Q 45

Tony Lloyd: It is a common question, I agree.

Ian McIsaac: I can see regulatory overload killing the golden goose. Many associations are smalldinner clubs and this, that and the other. I think that trying to generate volunteerism and political engagement is, by and large, a good thing.

Nicholas Winterton: I call Andrew Tyrie.

Tony Lloyd: Sir Nicholas, this is a general question.

Nicholas Winterton: You addressed it to Mr. McIsaac, but if you want the other witnesses to answer, please go on.

Q 46

Tony Lloyd: To clarify, the first specific question was to Mr. McIsaac and the more general question was to all the witnesses.

Hilary Stephenson: I think that there is a clear difference between organisations that donate a few hundred pounds, which are primarily volunteer organisations, and much larger organisations and donations. In going along this line, the way to do it would be to have a kind of cap on where that imposition came in. In principle, it would seem quite sensible, although, as I said, I do not have hands-on expertise to whether there are further complications with it.

Roy Kennedy: In principle, it would be a good thing. You have to get the figures right. Perhaps we could follow the model of the £200 that is recordable by the association with the report at another level. Yes, we should be clear where the money is coming from.

Andrew Tyrie: I have no questions. The point that I wanted to raise was answered by Ian McIsaac in response to a question put to him earlier.

Nicholas Winterton: Does any member of the Committee wish to ask further questions?

Q 47

David Kidney: I have a brief question for all the witnesses. Others witnesses have commented on things that they believe should in the Bill. Given that you have all stressed the voluntarism of your partiesmine includedis there anything that you regard as a missed opportunity and that should be in the Bill that would encourage voluntarism, strengthen it or acknowledge it? Shall we start with Mr. McIsaac?

Ian McIsaac: I can answer that question in a slightly different way. Anything that seeks to impose, by regulatory sanction, complex and ill-understood rules on volunteers will kill it stone dead. That is a negative answer.
As for encouraging voluntarism, it will flourish on its own as long as it is not put down. By and large, people are interested in politics and they want to have the opportunity to engage. As for declarations, one of my concerns is that those who give money will consider there is something dodgy about supporting political parties. They will think that Oxfam is okay, but not this or that party, because they have to go through a special legal hoop for it. The negatives are the problem. Take the negatives away and it will flourish.

Hilary Stephenson: Clarity is the thing for me. Volunteers worry when they do not know whether they are breaking the law. The vast majority of them want to do the right thing. We need anything that is simple, clear and consistent. That brings me back to one of the good things in the previous legislation: the clarity concerned with the starting of expenses during an election. Unless we are moving into much broader areas, I strongly urge that simple clarity is very helpful.

Roy Kennedy: Clarity and certainty. We are all officials, but all the parties are basically volunteer armies. People have to be certain and have clarity about their responsibilities, what they have to do and what they do not have to do. That is what we need. We have all referred to raising the limits. I hope that you will consider it.
I have another point to make that is not about voluntarism. When we gave evidence to the Graham inquiry and supported the idea of commissioners, we also said, although the inquiry did not take it on board, that perhaps the others who should have a role in the commission were the administrators. They obviously run the election from the other side of the table, as it were. We put that forward. They certainly have a valid viewpoint that should be taken account of as well.

Nicholas Winterton: On behalf of the Committee, I ask our witnesses, who have been extremely helpful, whether they wish to express any views to us about the Bill that the Committee will be considering from next Tuesday morningline by line, almost word by word?

Ian McIsaac: The only thing I would say is this. I have been involved with this party, or any political party, for less than three years, but I have noticed that innocent mistakes have a habit of being magnified in the press, on the blogs and the rest of it, as if they were some sort of scandal. People make mistakes, even in the best regulated organisations. To open up the possibility for mistakes, and thereby the whiff of scandal, could be very counter-productive.

Q 48

Andrew Tyrie: What are you suggesting?

Ian McIsaac: That it would be absolutely inevitable. With the thousands of donations involved, the volunteers involved, the lack of training and compliance manuals, and all the rest of it, there will be mistakes. The Electoral Commission would have no choice but to act on those mistakes.
I am not talking about breaking down peoples doors, but even the commission putting it on its website that such and such a constituency association accepted some dodgy donation from someone would mean that the press were on to it and the whole thing would become a hoo-hah, when actually it was nothingsomeone dropped the declaration down the back of the desk and found it a month later. That is the sort of problem that we have to be very careful not to exacerbate.

Hilary Stephenson: I want only to reiterate the point about clarity and enforceability of the rulesthat has to be key. They are not going to be perfect; it is not possible to do something perfect here. However, something that people can understand and not accidentally fall foul of is what we need. To that end, I hope that the Committee will consider the possibility of a spending limit over a period of years in the electoral cycle.

Roy Kennedy: Just a point about volunteersall parties are volunteer armies. Today, you have probably heard with surprise the amount of agreement on certain things between the three representatives. You can take that on board in your deliberations over the next few weeks. Thank you.

Nicholas Winterton: On behalf of the Committee, I thank our three witnesses from the Conservative, Liberal Democrat and Labour parties for the very helpful evidence that they have given, and for the frank and full way in which they dealt with every question put to them. Thank you very much indeed.
Further consideration adjourned.[Ian Lucas.]

Adjourned accordingly at four minutes to Three oclock till Tuesday 11 November at half-past Ten oclock.